Sixty-five per cent of all money spent on advertising in digital media in 2019 will be traded programmatically, according to Zenith's Programmatic Marketing Forecasts, published today.

Advertisers will spend US$84bn programmatically next year, up from US$70bn this year, which represents 62% of digital media expenditure. We predict that in 2020 advertisers will spend US$98bn on programmatic advertising, representing 68% of their expenditure on digital media advertising. By digital media we mean all forms of paid-for advertising within online content, including online video and social media, but excluding paid search and classified advertising.

n Australia, programmatic spend has grown from just US$61m (AU$83.7m) in
2012, to US$1.27bn (AU$1.74bn) this year. By 2020, Zenith predicts it
will rise to US$2.13bn (AU$2.92bn), representing 67% growth between 2018
and 2020. Programmatic now comprises 46.8% of digital display
advertising, which is predicted to jump to 67.2% by 2020. Programmatic
spend will represent 27% of all digital ad spend by 2020, from only 18%
in 2018.

The breadth of ad formats available through
programmatic trading is improving, with more mobile, video and audio
formats coming online all the time, though brands and agencies need to
do more to push publishers to improve the quality of their inventory,
which needs at minimum to be safe and viewable.

Says Nickie
Scriven (pictured), CEO, Zenith Australia: "In Australia we anticipate that a
number of new channels will be transacted programmatically, such as
audio (music & podcast), radio and addressable TV, which is why we
are seeing continued programmatic growth.

"The biggest change we
will see in 2019 will be in the video space. The TV networks have been
actively promoting addressable TV and Catch Up TV (CTV) and, coupled
with the launch of VOZ next year, we predict that a number of large TV
advertisers will transact more of their online video programmatically.
As TV and CTV become more connected, and first and second party data
becomes more important and more widely used, the effectiveness of
targeting will offset any technology and data costs. Programmatic will
become the most efficient and effective way to buy media in the future."

Globally,
the growth in programmatic advertising is slowing as it cements its
position as the most important method of digital trading. Zenith
estimates that global programmatic ad spend will grow 24% in 2018, down
from 32% growth in 2017, and forecast 19% growth in 2019, followed by
17% growth in 2020. Zenith Australia estimates that local programmatic
ad spend will grow 59% in 2018, up from 54% growth in 2017, and
forecasts 29% growth in 2019, and 30% in 2020.

In dollar terms,
the biggest programmatic market is the US, where we expect US$40.6bn to
be spent programmatically in 2018 - 58% of the total. China is in a
distant second place, spending US$7.9bn on programmatic advertising this
year, followed by the UK, with US$5.6bn of programmatic ad spend.
Australia sits at sixth position.

The US is also the market that
has most embraced programmatic advertising, trading 83% of all digital
media programmatically this year. Canada is in second place, trading 82%
of digital media programmatically, followed by the UK, with 76%, and
Denmark, with 75%. By 2020, programmatic advertising will account for
more than 80% of digital media in all four markets. Canada will have
almost completed the transition to pure programmatic trading, spending
99% of digital media programmatically that year.

Zenith expects
all markets to follow Canada and use programmatic trading for all
digital media transactions eventually. Indeed, it's only a matter of
time before programmatic trading becomes the default method of trading
for all media. However, the transition is taking slightly longer than we
expected - last year we forecast that 64% of digital media would be
programmatic in 2018, and 67% would be programmatic in 2019, so we have
pulled back both forecasts by two percentage points.

The
introduction of privacy legislation such as the EU's GDPR has had some
chilling effect by making certain data previously used in programmatic
transactions unavailable, and making other data more costly to process.
But we think the main reason for the slowdown in spending on
programmatic media is that advertisers are investing more in
infrastructure and data to make their programmatic activity more
effective.

To make the most of their programmatic campaigns,
advertisers have to reorganise internally to give programmatic trading
the high-level support and understanding it needs. Agencies can only
extract maximum effectiveness from their programmatic strategy in a
proper partnership with their clients. And a programmatic strategy can
only ever be as effective as the data used to execute it.

Says
Benoit Cacheux, global head of digital and innovation, Zenith:
"Programmatic trading improves efficiency and effectiveness, and is
gaining a dominant share of digital media transactions. The scale of
operational restructuring to make the most of it is both extensive and
expensive, though, and advertisers are spending more carefully while
they invest in infrastructure and data and review the quality of media.
All programmatic advertisers need a strategy for acquiring the best and
most comprehensive data available, and to treat this data as a vital
corporate asset."

The most valuable data is first-party data,
either explicitly provided by consumers or gained by tracking their
activity on owned websites. It is also becoming more common to use
second-party data, by forming data sharing partnerships, between - for
example - brands and online retailers. Third-party data is widely
available but does not give advertisers a competitive advantage, since
all advertising can use it to target the same segments.

Advertisers
should continually vet and interrogate third-party data to ensure they
are truly adding incremental reach. By combining all this data with
their own CRM systems, advertisers can model consumer behaviour, and the
more advanced are using machine learning to predict it. Data and new
technology is enabling brands to move from tracking cookies to
communicating with individuals.

Says Jonathan Barnard, head of
forecasting and director of global intelligence, Zenith: "Technology is
making programmatic advertising work harder for brands. Artificial
intelligence promises to unlock new understanding of customers as
people, as well as improving the optimisation of the trading process."